Give a stimulus package to struggling businesses

Disclosures that loan defaults have hit a one-year high calls for a stimulus package to jump-start the economy and create jobs. While recently reported growth figures suggest post-Covid economic recovery, the defaults point to a struggling business community.

The economy rebounded in 2021 to grow at the fastest pace in 11 years on easing of Covid-19 restrictions which boosted recovery in key sectors excluding agriculture, whose activities were hit by poor rainfall. But Central Bank of Kenya (CBK) data released yesterday show non-performing loans (NPLs) accounted for 14.1 per cent of private sector loans, up from 13.1 per cent in December and 13.6 per cent in August 2020, at the peak of the pandemic. That shows businesses and workers are battling a cash crunch, hence the need for state action.

Clearly, businesses that tapped bank credit based on their projected cash flows are struggling to meet the loan obligations. Workers who went for mortgages and unsecured loans to purchase goods such as furniture and cars and foot expenses like school fees are falling behind in bank payments.

Unsecured loans are given on the strength of one’s salary, and defaults could indicate job losses. Many businesses also want the elections to be over before investing further, mindful of the weeks of violence that followed the disputed 2007 presidential poll.

Therefore, policy honchos must considers ways of stimulating the business to boost their cash flows and offer them room to expand and hire more workers. The government must also speedily pay its pending bills, which have piled up to hundreds of billions. That can ease the cash flows hitches among suppliers, particularly small and medium enterprises.

The state must also expedite billions of shillings in value-added tax refunds to businesses. It must also not hesitate to offer stimulus packages to ventures such as tea, coffee, sugar and livestock farming—sub-sectors that are critical in putting money in people’s pockets or improving purchasing power. Today, few such farmers can count the gains of agriculture.

A state-backed rescue package would help to cushion hard-hit families and help up the small-scale businesses that are yet to recover from the aftermath of Covid-19 and also propel the economic activity towards its pre-pandemic path.